Medicaid Alternative Benefit Plans: Coverage, Costs, and Appeals

Medicaid Alternative Benefit Plans are the coverage packages most adults who qualify for Medicaid through the Affordable Care Act’s expansion actually receive. Authorized under Section 1937 of the Social Security Act and expanded by the ACA, these plans must include ten essential health benefits, cap what you can be charged out of pocket, and give certain people the right to switch into traditional Medicaid instead. Roughly 40 states and the District of Columbia have adopted expansion, which makes an Alternative Benefit Plan (ABP) the front door to coverage for millions of adults with incomes at or below 138 percent of the federal poverty level.1Medicaid.gov. Alternative Benefit Plan Coverage

Who Gets Enrolled

The largest group in ABPs is the Medicaid expansion population, sometimes called the “new adult group”: adults ages 19 through 64 whose income falls at or below 133 percent of the federal poverty level, with a built-in 5-percent income disregard that raises the effective ceiling to 138 percent.1Medicaid.gov. Alternative Benefit Plan Coverage If your state expanded Medicaid and you qualify through the new adult group, your benefits come through an ABP rather than the traditional Medicaid benefit package.

States can also move other eligibility groups into ABPs, including parents and caretaker relatives who would otherwise receive traditional benefits, provided the state submits a plan amendment that the Centers for Medicare and Medicaid Services approves.2eCFR. 42 CFR 440.315 – Exempt Individuals

What an Alternative Benefit Plan Must Cover

Every ABP has to cover the same ten essential health benefits the ACA requires of individual and small-group insurance:3eCFR. 42 CFR 440.347 – Essential Health Benefits

  • Ambulatory patient services (outpatient care and doctor visits)
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services
  • Prescription drugs
  • Rehabilitative and habilitative services
  • Laboratory services
  • Preventive and wellness services, including chronic disease management
  • Pediatric services, including dental and vision for children4Centers for Medicare and Medicaid Services. Information on Essential Health Benefits (EHB) Benchmark Plans

A plan that leaves out any of those ten categories does not qualify as an ABP and cannot draw federal matching funds.

Full EPSDT for Anyone Under 21

For enrollees under 21, the plan has to provide the full Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit. If the plan’s regular package doesn’t cover something EPSDT requires, the state must fill the gap with wrap-around services.5eCFR. 42 CFR 440.345 – EPSDT and Other Required Benefits Children in an ABP are entitled to all medically necessary care even if it goes beyond what adults on the same plan can get.

Transportation and Community Health Centers

Two wrap-around requirements matter to enrollees whether or not the benchmark plan mentions them. First, the state must provide both emergency and non-emergency transportation to medical appointments. Having an ABP does not relieve the state of that obligation, and any limits it places on rides cannot be so restrictive that they effectively block access to care.6eCFR. 42 CFR 440.390 – Assurance of Transportation7Medicaid.gov. Medicaid Transportation Coverage Guide SMD 23-006 Second, you have to be able to get care at Federally Qualified Health Centers and Rural Health Clinics, either through the plan itself or as a separate wrap-around benefit paid at Medicaid prospective payment rates.8eCFR. 42 CFR Part 440 Subpart C – Benchmark Benefit and Benchmark-Equivalent Coverage

What You Can Be Charged

States can charge premiums and cost-sharing to ABP enrollees, but Section 1916A of the Social Security Act caps the amounts by household income:9Social Security Administration. Social Security Act 1916A – State Option for Alternative Premiums and Cost Sharing

  • At or below 100 percent of the federal poverty level: no premiums and no cost-sharing.
  • Between 100 and 150 percent FPL: no premiums. Cost-sharing on any single service cannot exceed 10 percent of the cost, and total cost-sharing for the family cannot exceed 5 percent of household income per quarter.
  • Above 150 percent FPL: combined premiums and cost-sharing cannot exceed 5 percent of household income per quarter, and any single service cannot exceed 20 percent of its cost.

Some enrollees are exempt from premiums regardless of income: children, pregnant women, terminally ill people in hospice, and Native Americans receiving care through the Indian Health Service or tribal health programs. States that charge premiums can only terminate coverage for nonpayment after at least 60 days of missed payments, and they must waive premiums when payment would cause undue hardship.9Social Security Administration. Social Security Act 1916A – State Option for Alternative Premiums and Cost Sharing

Because most people in the expansion group have incomes below 138 percent FPL, the vast majority fall into the first two tiers, where cost-sharing is either prohibited or tightly capped.

Mental Health Parity

ABPs must comply with the Mental Health Parity and Addiction Equity Act. Cost-sharing and treatment limits on mental health and substance use disorder services cannot be stricter than the limits on comparable medical and surgical benefits.10eCFR. 42 CFR 440.395 – Parity in Mental Health and Substance Use Disorder Benefits That covers copayments, coinsurance, out-of-pocket maximums, visit limits, and rules like prior authorization and medical necessity criteria.11Medicaid.gov. Parity

Parity is checked category by category. If the plan charges a $40 copay for most outpatient medical visits, it cannot charge $60 for outpatient therapy sessions. The comparison runs separately for each service category (inpatient, outpatient, emergency, and prescription drugs) and for each type of financial requirement or treatment limitation.

Who Can Opt Out

Federal regulations exempt several groups from mandatory ABP enrollment. If you fall into one of these categories, you have the right to receive traditional Medicaid benefits instead. Under 42 CFR 440.315, the exempt groups include:2eCFR. 42 CFR 440.315 – Exempt Individuals

  • Pregnant women covered under mandatory Medicaid eligibility
  • People who are blind or disabled, whether or not they receive Supplemental Security Income
  • Medicare beneficiaries
  • Terminally ill individuals receiving hospice care
  • Residents of hospitals, nursing facilities, or intermediate care facilities who must spend nearly all their income on care costs
  • Medically frail individuals or those with special medical needs
  • People who qualify for long-term care services
  • Former foster care youth eligible under specific Medicaid provisions
  • Parents and caretaker relatives the state is required to cover

There’s an important wrinkle for the expansion group. If you qualify through Medicaid expansion and also meet one of the conditions above, you aren’t fully exempt from ABP enrollment. Instead, the state must offer you a choice between an ABP built around the ten essential health benefits and an ABP that mirrors the state’s full traditional Medicaid benefit package.12Medicaid.gov. Alternative Benefit Plan Eligibility Either way the coverage runs through an ABP framework, but the second option ensures you aren’t cut off from services traditional Medicaid would cover.

The Medically Frail Category

The medically frail designation is where the exemption system matters most in practice. Federal rules require states to include at least these people in their definition:2eCFR. 42 CFR 440.315 – Exempt Individuals

  • People with disabling mental disorders, including children with serious emotional disturbances and adults with serious mental illness
  • People with chronic substance use disorders
  • People with serious and complex medical conditions
  • People with physical, intellectual, or developmental disabilities that significantly impair daily activities
  • People with disability determinations based on Social Security criteria

States have to screen for medically frail status at enrollment, but you can also self-identify at any point afterward. Once you’re identified as medically frail, the state must notify you in writing of your option to switch to the traditional Medicaid benefit package.12Medicaid.gov. Alternative Benefit Plan Eligibility

If Your Plan Denies a Service

If your ABP denies a service, reduces coverage, or refuses to authorize a treatment, you can challenge that decision.

Plan-Level Appeal

Most ABP enrollees get coverage through a managed care organization, which must run its own grievance and appeal system. Grievances about quality of care, wait times, or customer service can be filed at any time and must be resolved within 90 calendar days. For a denied service or a benefit reduction, you have 60 calendar days from the date on the denial notice to file a formal appeal. Standard appeals must be decided within 30 calendar days; expedited appeals within 72 hours when your health is at immediate risk. Either deadline can be extended by up to 14 days if you request it or the plan shows a legitimate need for more information.

The denial notice itself has to explain the specific reason for the decision, your right to see the clinical criteria and evidence the plan used, how to appeal, and how to keep your benefits going while the appeal is pending. If the plan was already covering a service and now wants to stop, the notice must go out at least 10 days before the cutoff.

State Fair Hearing

After exhausting the plan-level appeal, or if your coverage isn’t through managed care, you can request a state fair hearing. This right applies to anyone whose claim is denied, including someone whose request for a medically frail exemption is turned down. You generally have up to 90 days from the date on the action notice to request the hearing. File before the reduction or termination takes effect and the state generally cannot cut your benefits until the hearing decision comes out. The state must issue a final decision within 90 days of receiving your request, or within 7 working days for expedited hearings when delay could jeopardize your health.13eCFR. 42 CFR Part 431 Subpart E – Fair Hearings for Applicants and Beneficiaries

The action notice has to include the specific reason for the decision, the regulation or law behind it, your right to a hearing, and whether coverage continues in the meantime. These protections apply to all ABP enrollees, not just the expansion group.